A New Jersey life insurer discovers that the insured materially misstated his health history in the application two and a half years after the policy was issued. Under N.J.S.A. 17B:25-4, what is the effect of the incontestability limit on the insurer's ability to contest the policy for those misstatements?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
The incontestability provision described by N.J.S.A. 17B:25-4 closes the insurer's window to challenge the policy for misstatements in the application after the policy has been in force for 2 years. A policy that has passed the 2-year mark stands even if a material misstatement later comes to light, which gives beneficiaries certainty that legitimate claims will be paid. The protection is a cornerstone of New Jersey life insurance contract law, policed in application by the Department of Banking and Insurance, and it is why candidates must know the 2-year contestable period precisely.
Why the other options are wrong
- A) The right to contest is time-limited; it does not survive indefinitely until a claim is presented.
- B) No beneficiary-consent mechanism exists; the contestable period simply expires after 2 years.
- D) Automatic rescission for any discovered misstatement is the opposite of the incontestability rule, which bars contest after 2 years.
Memory hook
Two years and the door locks: misstatements can no longer unmake the policy.